SECTOR: INFORMATION TECHNOLOGY COMPANY: Tata Consultancy Services Ltd

NAME: Stuti Dalmia DIVISION: C ROLL NO.: 9 Programme : MBA (core)

INTRODUCTION TO THE SECTOR

The Information Technology industry has played a significant role in boosting the image of the country and making its presence felt on the global front. Over the past decade, the Indian IT-BPO sector has become the countrys premier growth engine, crossing significant milestones in terms of revenue growth, employment generation and value creation, in addition to becoming the global brand ambassador for India. The changing demand perception, customer conversations and requirements acted as a driver to build in greater efficiencies and flexibility within the service delivery and the business models. Globalisation not only fostered innovation but also changed the face of the industry exposed to the world. The industry is estimated to aggregate revenues of USD 73.1 billion in FY2010, with the IT software and services industry accounting for USD 63.7 billion of revenues. During this period, direct employment is expected to reach nearly 2.3 million, an addition of 90,000 employees, while indirect job creation is estimated at 8.2 million. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 6.1 per cent in FY2010. Its share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to almost 26 per cent in FY2010. WEATHERING THE RECESSION OF 2009 The IT industry was put to real test during the last two years. 2008-2009 not only provided a platform to the IT industry to grow leaps and bounds but also exposed it to the threat of scepticism prevailing due to various cost cutting measures. While the industry displayed tenacity and resilience, it also commenced its journey to achieve its aspirations in view of the altered landscape. It commenced working on its agenda to diversify beyond core off erings and markets through new business and pricing models, specialise to provide end-to-end service offerings with deeper penetration across verticals, transform the process delivery through re-engineering and enabling technology, innovate through research and development and drive inclusive growth in India by developing targeted solutions for the domestic market. All these measures, along with Indias game changing value proposition has helped India widen its leadership position in the global sourcing market. The above measures undertaken by the sector in the altered landscape played a key role in strengthening India s strategic role in the outsourcing market. The advent of 2010 has signalled the revival of outsourcing within core markets, along with the emerging markets increasingly adopting outsourcing for enhanced competitiveness. Key demand indicators in the last two quarters such as increased deal flow, volume growth, stable pricing, and faster decision making has made the industry post good results. Though full recovery is expected in another two quarters, development of new growth levers, improved efficiency and changing demand outlook signifies early signs of recovery.

KEY PLAYERS/MAJOR COMPANIES IN THE SECTOR

The Indian information technology sector is one of the sunshine sectors of the Indian economy showing rapid growth and promise. There are a large number of multi-national IT enterprises operating in India in sectors such as: Integrated Chip Design, System Software, Communication Software, R&D Centres, Technology Support Sector, Captive Support Sector, BPO Sector etc reaping the cost and quality advantages. The Key Players (Tier 1) dominating the industry are as follows: 1. Tata Consultancy Services Ltd. 2. Wipro Technologies Ltd. 3. Infosys Technologies Ltd. The other key players include the following: 1. IBM 2. HCL 3. Patni 4. Polaris 5. Cisco 6. KPIT Cummins 7. Kanbay 8. i-Flex Solutions 9. Cognizant 10. Sapient NASSCOM announced the Industry rankings for FY2008- 09. While TCS emerged as top exporter during the period followed by Infosys and Wipro, Genpact dominated the BPO space followed by WNS Global services, TCS BPO and IBM Daksh. NASSCOM Top three IT Services Exporters 2008-09 were Tata Consultancy Services, Infosys Technologies Ltd and Wipro Ltd.

GOVERNMENT REGULATIONS IN THE SECTOR

There is a Department of Information Technology headed by Sachin Pilot, Minister for State. The Department of Information Technology (DIT) regulates the various aspects of Indian information technology. The following are comprehensive functions of the DIT: y Policy matters relating to Information Technology; Electronics; and Internet (all matters other than licensing of Internet Service Providers) y Promotion of Internet, IT and IT-enabled services y Assistance to other departments in the promotion of e-governance, e-commerce, emedicine, e-infrastructure, etc. y Promotion of Information Technology education and Information Technology-based education

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Matters relating to Cyber Laws, administration of the Information Technology Act 2000 (21 of 2000) and other IT-related laws Matters relating to promotion and manufacturing of semiconductor devices in the country excluding all matters relating to Semiconductor Complex Limited Mohali; the Semiconductor Integrated Circuits Layout Design Act, 2000 (37 of 2000) Interaction in IT-related matters with international agencies and bodies, e. g., Internet for Business Limited, Institute for Education in Information Society and International Code Council-on line Initiative on bridging the Digital Divide: matters relating to Media Lab Asia Promotion of standardization, testing and quality in IT and standardization of procedures for IT applications and tasks Electronics Export and Computer Software Promotion Council National Informatics Centre Initiatives for development of hardware and software industries including knowledgebased enterprises, measures for promoting IT exports and competitiveness of the industry Efforts for increasing the acceptance of FOSS at a national level (NRCFOSS)

TATA CONSULTANCY SERVIVES Ltd Tata Group, founded by Jamshedji Tata in 1868 is one of Indias most respected institutions today. Established in 1968, Tata Consultancy Services has grown to its current position as the largest IT services firm in Asia based on its record of outstanding service, collabor tive a partnerships, innovation, and corporate responsibility. TCS is a flagship subsidiary of the Tata Group, which has interests in areas such as energy, telecommunications, financial services, manufacturing, chemicals, engineering, materials, government and healthcare. Its mission reflects the Tata Group's longstanding commitment to providing excellence: 1. To help customers achieve their business objectives by providing innovative, best-inclass consulting, IT solutions and services. To make it a joy for all stakeholders to work with the organization. 2. To be one of the top 10 global companies by the year 2010. 3. Values Leading change. Integrity. Respect for the individual. Excellence. Learning and sharing. The organisation is known for its ethical standards. Remain close to customers and help them enhance efficiency and enable growth; focus on execution to deliver a superior quality of experience; and manage costs and operations optimally has been the foundation principle for the group. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled services delivered through its unique Global Network Delivery Model, recognized as the benchmark of excellence in software development. The organisation delivers real results to global businesses, ensuring a level of certainty no other firm can match.

The successful legacy that TCS has left is largely due to the ability to respond quickly to the needs of their markets and get more strategic advantage from IT. Whether it's IT services, business solutions, or outsourcing, TCS assures a level of certainty that others can't match.

KEY PERFRORMANCE INDICATORS

The top five Indian IT players have not only emerged smarter out of the recent recession but also managed to raise their profitability and clocked positive revenue growth. The latest Forrester Research report says that these five firms TCS, Infosys, Wipro, HCL and Cognizant actually increased their profitability in the past 12 months despite offering 46% discounts to their clients in a tough economy. Says Forresters principal analyst Sudin Apte: To beat the recession, most Indian firms took serious cost-cutting steps such as cuts in salary and variable pay, curbing spend on marketing and long-term R&D and overheads, and even downsizing in a few cases. In addition, as attrition was at a record low, their recruitment costs and annual raises were flat or reduced by 5-7%. Such systematic budget cuts, coupled with tight approval mechanisms, helped these companies cut costs virtually by double-digit percentages. TCS wants to build on its current leadership position and leverage its large number of existing client relationships, wide range of service lines, globally distributed delivery centres, and strong presence in emerging markets. To that effect, it continues to invest in areas such as platform-based BPO, components and framework, and software products for the financial services industry. 2010, Q2, 20 Apr 2010 Indias largest software exporter Tata Consultancy Services (TCS) joined rival Infosys in signalling an improving environment for the countrys $60-billion IT industry, as increased spending from top customers such as Citibank and General Electric boosts profits. TCS is the second major Indian information technology firm to report strong quarterly results, underscoring optimism about a recovery, after a severe downturn crimped margins and profit growth in 2009. Earlier this month, Infosys made a thumping statement on business recovery by forecasting a 16-18% growth for this financial year, awarded wage hikes of 14% and revealed plans to recruit 30,000 employees. Mumbai-based TCS posted the fastest profit growth in three years by reporting a 47% jump in fourth-quarter profit to Rs 1,931 crore. Revenue rose at a more sluggish pace of 7.9% to Rs 7,377 crore. TCS profit was boosted by Rs 42 crore of gains due to currency fluctuations while a 3.6% appreciation in the rupee impacted operating profit margins by 1.92%. While FY10 has been a challenging year, we have used this time to improve efficiencies and generate better returns by boosting margins. Our cost base has remained constant and we have leveraged this to support higher business growth, N Chandrasekaran, CEO and MD of TCS, said.

TCS, which counts Citigroup, JPMorgan and UKs Cardiff Council among its top customers, also made its highest-ever net addition of employees in a quarter at 16,668. The company plans to hire about 30,000 employess in FY11, which will take its payroll to nearly 1.9 lakh, making it the largest private sector employer in the country. 2009, Q2, 16 Oct 2009 Tata group company, Tata Consultancy Services (TCS), reported net profit of Rs 1,642 crore in the second quarter (July-September), up 29.17 per cent over the corresponding period last year. The company posted a revenue of Rs 7,435 crore in the same period, up 6.93 per cent compared to the year-ago period, the company said. "TCS has delivered a sterling performance during the quarter. We are seeing an improvement in market conditions. With our clients' budgets still being tightly managed, we continue to deliver higher value to customers, deepening our reltionships and focusing on superior operational management," its Managing Director & CEO, N Chandrasekaran, said. The investments made by TCS in its market footprint and its full services offerings were holding it in good stead to capitalise on emerging growth opportunities, he added. The company's international business grew 5.3 per cent sequentially in Rupee terms. TCS's strong market presence in the US helped the company capitalise on the emerging US recovery, a company statement said. During the reporting quarter, the IT major added 30 new clients. Besides, it added 5,530 employees.

MARKETING INITIATIVES
TCS has certainly pulled away from the rest of the offshore pack in terms of brand acceptance and market performance across Europe. Europe is TCS' second-largest market segment, representing around 30% of global revenues, with a CAGR of 45% between 2007 and 2009, and a client base of over 350. To support growth in Europe, TCS has focused on the following: Strengthening regional presence: TCS has eight regional and nearshore delivery centres in Europe (including local delivery centres in Germany, Luxembourg, Switzerland, and the Netherlands), is in the process of completing a centre in Spain, and plans a local delivery centre in France. In the next 12 months, TCS will put more efforts into gaining strength in Germany and France. This makes good sense, since these two geographies are the second and third largest IT services markets in Europe, after the U.K. TCS is making progress in Germany we spoke with some German TCS clients during the event, and they were happy customers, albeit with a staff augmentation focus. Nonetheless, TCS' on-the-ground presence remains small in key markets. Its French operation has fewer than 80 employees, for example. In offshore-sceptical territories such as France, TCS needs a credible local presence, which means investing hard cash in hiring experienced, senior local personnel before (not after) it starts winning major deals. Gaining a stronger footprint in France will

take more time for the company. After all, French organizations (excluding large multinationals) are less willing to offshore, and TCS must counteract its natural caution and margin protection with the need for local credibility. Investing in partnerships: Partnerships play a key role in supporting TCS growth in Europe; notably its partnerships with SAP and Oracle. TCS has also formed partnerships with local niche service providers like Arhs, particularly in Belgium and France (where the client base is less offshore-friendly) and says that this will increase its win rate. Commercial models: TCS says that cost optimization is still the core customer requirement. However, that cost focus does not preclude deploying novel engagement models, and TCS says that it is employing diverse commercial models, ranging from co-sourcing (particularly in the continent where it still needs to build trust), outcome-based pricing (with its more mature outsourcing clients), and managed services on demand. Customer-centricity: Like many competitors, TCS sees customer intimacy as critical to driving new revenues in a time of flat/falling and consolidating services spend by enterprises and public bodies. TCS grouped its business units around key vertical markets in April 2008, to better focus on customer needs. The U.K. organization is already aligned by vertical markets, although continental Europe is still grouped around major centers of excellence. To support its "Experience Certainty" branding strategy, TCS is investing in internal training, better customer management, and in delivering improved customer experience (something it flagged as a priority a year ago).

CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES

TCS has always recognized the responsibility Corporates should have towards the wider communities they operate in. Be it girl child education in South Asia in collaboration with UNICEF or adult literacy programs in South India, TCS believes in using IT as an instrument for social development and change. Other TCS' community initiatives have been in areas addressing environmental and civic problems; setting up and maintaining infrastructure for urban beautification, pollution reduction and healthcare; waste management in the office environment, tree plantation and water treatment. Some of the initiatives by TCS have been: Advanced Computer Training Centre for visually impaired TCS pioneered an Advanced Computer Training Center (the first of its kind in India) for the visually impaired. This center, launched at the MN Banajee Industrial Home for the Blind at Jogeshwari, Mumbai, offers courses that are in sync with industry requirements, providing the visually-impaired with life-affirming employment opportunities. TCS-Maitree has pro-actively worked towards providing an inclusive environment for the differently-abled. With the belief that people with disabilities offer incredible reserves of untapped potential and an alternative talent pool, TCS-Maitree has recruited more than 30 differently-abled people in various branches of TCS. The following are some of the roles in which the visually impaired persons are working in TCS: Infrastructure Services Management BPO processes Learning & Development coordinator Human Resource Manager

Global Helpdesk Accessibility testing

Rural Development Initiative (at Panvel) Wazapur (Raigad district of Maharashtra) is a village just off the Mumbai-Pune highway, near Panvel. In spite of being so close to the city, the village is devoid of even the most basic infrastructure and amenities. TCS-Maitree has been working at the ground level over the last three years to bring about development in the village. A sustainable model has been built to improve education, healthcare, and the environment in the area. What started off as a children's education program has today grown into a larger movement with developmental activities in the areas of water supply, illiteracy, and women empowerment in addition to the focal point of education. Apart from setting up a primary and a secondary school, some other highlights of the education initiative are: Mid-day meal scheme for Balwadi kids Computer literacy program A state-of-the-art science lab Taking up the cause of women empowerment, TCS-Maitree launched the WEP (Women Empowerment Program) where the women of the village were taught basic arithmetic and created awareness in health and hygiene. More than 25 women from three villages in the area have been trained in embroidery, stitching, and other textile craftwork over the last one year with help from the Women's India Trust. A new Gram Vikas Abhiyaan Kendra was recently inaugurated to facilitate income generation for the women. TCS-Maitree has also made strides in the area of health, conducting HIV/ AIDS sensitization sessions as well as health check-up camps for the villagers and school children. HIV AIDS awareness program TCS-Maitree initiated TCS first steps in the area of HIV/AIDS Sensitization and Awareness a few years ago. The focus of the initiative is to treat HIV as a social issue, as against treating it as a solely medical prerogative. Associates across the TCS are participating in TCSMaitree's aim to spread awareness and sensitize people about HIV/AIDS. The highlights of this initiative are: Commemorating World AIDS Day Red Ribbon distribution at all offices Online Quiz for creating more awareness s Removing myths and misconceptions through articles Peers Educator Program - Communicating with associates in their own language, through their peers

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PORTERs FIVE FORCE MODELR

In the case of both software outsourcing and BPO, for TCS there are few important suppliers, because TCS inputs are standard commodities and there is little opportunity for differentiation on the input side. The four forces that are most problematic are as follows: 1. 2. 3. 4. Bargaining power of customers The threat of new entrants The threat of substitutes The competitive rivalry with existing layers.

We examine each of these four forces in their turn for both software services outsourcing Bargaining power of customers In the context of competitive forces helps to explain why TCS built its business around applications programming: given the problems of distance, and operating from India, this was the easiest component of the business to build. In the early days of the software exporting business, the software vendor market was dominated by a few large global suppliers such as IBM. Indian firms were viewed as too small to matter for obtaining significant business. In addition, they competed actively with each other at the low-end. The result was that TCS and its Indian peers chose components of the business that were relatively low value-added and relatively simple to do. TCS also faced a client market that was dominated by the large banks and insurance companies. While it actively sought alliances with larger vendors as a competitive strategy, its most successful strategy was to directly approach clients and accept the lower rates that its competitive position necessitated. Looking ahead, TCS must continue to work to reduce the bargaining power of customers by trying to move the purchase decision away from price. This means that TCS must deliver more than undifferentiated programming by moving up the value chain. Such a movement is difficult in software services because the customers have deep domain expertise and almost invariably wish to retain the tasks grouped under strategic consulting. Moreover, customers understand that if they outsource the strategic consulting, then their bargaining power will be reduced. TCS must develop sufficient expertise so as to make outsourcing these tasks a compelling value proposition. Of course, it is exactly in these realms that the multinational outsourcing firms such as IBM, Accenture, and EDS are the most ferocious competitors. Forging alliances is often viewed as a good strategy to offset clients bargaining power. However, building alliances with firms working in clients locations should be discounted as this would further focus TCS in applications development. On the other hand, the acquisition of a medium-sized American firm with strong client relationships and domain skills could provide an attractive opportunity. Although costs per employee would rise, the rise would be small since labor requirements are lower for higher value-added Threat of new entrants Meanwhile, the threat of new entrants is declining rapidly as the larger firms have rapidly increased their size, market share, and credibility with customers. However, although firms strive to reduce their direct competition through product differentiation, in each market segment there continue to be numerous players. Competition from existing players

A key concern for TCS is competition from existing players as it has generated competition for existing business and created significant pricing pressures. Globally, firms such as EDS have positioned themselves as capable of undertaking large, turnkey projects in order to differentiate themselves from competitors such as IBM and Accenture that focus on higher value-added work such as consulting. This suggests an organically-driven growth strategy for TCS: that TCS continue to do the same kinds of work that it currently does, but try to capture a greater portion of the value-addition by undertaking larger projects. Though it has already demonstrated a capability in remote project management, it would be required to further increase this capability. However, there are some risks to this strategy. TCS large size suggests that it may have already maximized economies to scale in applications development. Adding scope, however, offers the potential for large gains since it necessarily involves higher value-added activities. In the early days, this was difficult, partly due to the technical difficulty in de-integrating the value-chain beyond the modularization of applications programming. Over the past few years, however, engineering services, systems design, and systems integration work have increasingly been outsourced (within the U.S.), suggesting that, if the skills are at hand, such work could be done in India. Most American providers of such services offer domain and software skills. TCS already has the software skills to move into these areas. But domain skills are a challenge. This is illustrated by TCSs focus on a few industries, notably banking and financial services). This reflects a general lack of domain expertise outside the financial services sector in India. Put differently, India does not have global-class, nontechnical knowledge in various other industries. As a result it is difficult to offer the full panoply of services a firm would want when it considers outsourcing a software development activity. Threat of substitutes These facts indicate that it will be difficult for TCS as an organization based and staffed primarily in India to change its revenue mix through organic growth. Acquiring Indian firms doing higher value-added business is a possibility, but there are few such firms in the Indian business environment. Essentially, the constraint that TCS faces is environmental rather than firm specific. In most sectors, Indian business conditions are sufficiently dissimilar to overseas client conditions that local domain expertise is of low relevance. The threat of substitutes in software services does exist as technology tools to speed coding etc. However, at this time the threat of substitutes seems rather remote.

SWOT Analysis
Infosys is one of the largest businesses in India with a turnover in excess of $4 billion in The company specializes in Information Technology (IT) and consulting. N.R. Narayana Murthy and six others started the company in 1981, and it is now the largest IT company in India with its headquarters in Bangalore (although it was started in Pune). It employs more than 90,000 IT professionals and was famously rated 'Best Employer in India.' It operates in a number of business sectors from banking to retail, and its services tend to encompass end-toend IT solutions which includes a whole bundle of added-value solutions from infrastructure to software engineering. Strengths

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Since the company is based in India its competitive advantage is enhanced. The Indian economy, despite weak economic indicators such as relatively high rates of inflation, has low labour costs. The workforce has relatively high skills levels in Information Technology. Couple these two elements together and we have an operational basis that offers low-cost based, highly skilled competitive advantage. Trained Indian personnel often speak very good English and are sensitive to Western culture, underpinned by India's colonial past. Infosys is in a strong financial position. The business turned over more than $4 billion in 2008. This means that it has the capital to expand, and also the basis to leverage potential investors. The company has bases in 44 global development centres, most of which are located in India, although the company has offices in many developed and developing nations. This means not only that Infosys is becoming a global brand but also that it has the capability to support the global operations of multinational clients. Weaknesses Infosys on occasion struggles in the US markets, and has particular problems in securing United States Federal Government contracts in North America. Since these contracts are highly profitable and tend to run for long periods of time, Infosys is missing out on lucrative business. Added to this is the fact that its competitors do well in terms of securing the same Federal business (and one should also take into account that many of its competitors are domiciled in the US and there could be political pressure on the US Government to award contracts to domestic organizations). Despite being a huge IT company in relation to its Indian competitors, Infosys is much smaller than its global competitors. As discussed above, Infosys generated $4 billion in 2008, which is relatively low in comparison with large global competitors such as Hewlett-Packard ($91 billion), IBM ($91 billion), EDS ($21 billion) and Accenture ($18 billion). It is sometimes argued that Infosys is weaker when it comes to high-end management consultancy, since it tends to work at the level of operational value creation. Competitors such as IBM and Accenture tend to dominate this space. Opportunities At a time of recession in the global economy, it may appear that some companies will reduce take up of services that Infosys offers. However, in tough times clients tend to focus upon cost reduction and outsourcing - with are strategies that Infosys offers. So hard times could be profitable for Infosys. There is a new and emerging market in China as the country undergoes a huge industrial revolution. The strategic alliance between Infosys and Schlumberger gives the IT company access to lucrative business in the gas and oil industries. Threats India is not the only country that is undergoing rapid industrial expansion. Competitors may come from countries such as China or Korea where there are large pools of low-cost labour, and developing educational infrastructures such as universities and technology colleges. Customers may switch to other offshore service companies in other countries such as China or Korea. Other global players have realised that India has the benefit of low-cost, highly-skilled labour that often speaks English and is culturally sensitive to Western practices. As with

all global IT players, Infosys has to compete for skilled labor and this may have the effect of driving up wage levels, and making it more difficult to recruit and retain staff.

In the case of both software outsourcing .

References
www.economictimes.com www.tcs.com IDC Report Nasscom Report